By Jiayi Wang and Ragdad Cani Miranti
Across the world, countries are facing a critical juncture in their structural transformation. In the Global South, the intensifying climate is leaving countries vulnerable to significant economic risks, including stagnation, middle-income traps, and premature de-industrialisation. Meanwhile, the Global North is showing a renewed interest in industrial policy, driven by geopolitical imperatives to secure supply chains, the urgency for climate adaptation and mitigation, and the need to reinvigorate domestic manufacturing sectors amid global competition
According to Sir Arthur Lewis, developing economies could achieve capitalist growth by utilising surplus labour from the traditional subsistence sector, as outlined in his renowned Dual Sector Model introduced in 1954. As Lewis insightfully noted, “The subsistence level is only a conventional idea, and conventions change.” This emphasises the transformative potential of shifting societal norms and economic structures to drive development.
But to what extent can Lewis’s dual-economy framework help us examine contemporary structural transformation? To discuss this question and other related issues, academics at the University of Manchester held a workshop titled ‘Structural Transformation and Contemporary Late Development.’ Scholars from various universities and institutions convened to explore new pathways and challenges for structural transformation, focusing on how Lewis’s theory can offer fresh insights and inspire solutions to contemporary development dilemmas.
Industrial green transformation, as an important form of structural transformation, was one of the main topics discussed. Could green transformation bring new opportunities for structural transformation in the Global South?
Technological innovation—the pivotal catalyst of the industrial green transition.
Lewis emphasised that technological change and knowledge accumulation are key drivers of economic growth. This theory remains relevant in the context of the green transition. The Global North has taken the lead in achieving significant successes in the areas of clean energy, circular economy, and energy efficiency. Examples include the European Union’s Green Deal and the United States’ Inflation Reduction Act (IRA).
But the political landscape around green initiatives remains dynamic and complex; for instance, the Trump administration immediately repealed the IRA upon taking office, underscoring the challenges of maintaining consistent policy support for green transitions. Despite these challenges, the impact of technological development is not confined to the Global North. Through the spillover effect of green technologies, the Global South has gained unprecedented opportunities to advance its green transition. A key example is China with its dual role as both a technology receiver and exporter in the global industrial chain. By introducing European wind power technology, China has rapidly become a major market for electric vehicles and energy storage, achieving independent research and development while reversing the flow of technology exports.
On the one hand, through technology transfer, international financing, and foreign investment, developing countries have been able to bridge the technology gap and achieve a green transition in a relatively short period of time. However, this process has not always been easy, having been accompanied by enormous challenges: the high cost of technology transfer and learning, intellectual property barriers, and imperfections in internal markets and institutions have often made it difficult for the Global South to take full advantage of technological spillovers. This cannot be achieved if we do not redefine the opportunities and remove the barriers that prevent the Global South from developing a green economy on its own terms.
Labour—the driving rhythm of the industrial green transition.
Lewis argued that the central driver of capital accumulation is the cross-sectoral movement of labour, an abundant factor of production in developing countries. In the Global South, intensive labour resources are an important comparative advantage of these economies. However, how to channel this labour force from informal employment to the formal sector and from traditional industries to green productive sectors to truly unlock its potential has become a key issue in achieving a green transition.
Participants explored the issue from different perspectives and put forward policy recommendations on various fronts. For instance, the importance of aligning cross-sector investment in fundamental research and development with local industrial policies to promote labour restructuring effectively, and the critical role of government intervention in driving economic transformation. It can be argued that targeted subsidies for green industries could serve as an effective policy tool to accelerate this transition.
There was also a debate on the efficacy of relying on multilateral development banks such as the International Monetary Fund and World Bank to provide the financial guarantees necessary for green technology upgrading and industrial transformation. These discussions underscored the diversity of viewpoints on balancing international financial dependence with fostering domestic capabilities within the Global South.
In addition, deepening regional cooperation was seen as an important path for enhancing the localisation capacity of green technologies and the level of independent innovation. For instance, through the sharing of energy technologies among ASEAN member countries, not only can regional synergies be created, but also the dissemination efficiency and applicability of green technologies can be enhanced.
In this process, participants pointed to the emerging opportunities for South and Southeast Asian countries in the global green product value chain. Taking Thailand, Indonesia, and India as examples, these countries can promote a shift in the labour force from low-skilled assembly jobs to higher value-added jobs through technology adoption, cooperation with higher education institutions, attracting foreign direct investment, and policy incentives. Such structural shifts not only enable labour resources to serve the green transition more effectively but also grant these countries enhanced competitiveness and stronger positions within global value chains.
Jiayi Wang is a doctoral researcher at the Global Development Institute at the University of Manchester working on green industry and just transition in China. You can reach her at jiayi.wang-40@postgrad.manchester.ac.uk.
Ragdad Cani Miranti is a doctoral researcher at the Global Development Institute at the University of Manchester. She is also a statistician at Statistics Indonesia. You can reach her at ragdad.miranti@postgrad.manchester.ac.uk.
Image: Randgruppe under a free licence on Pixabay